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  • 21 Aug, 2019

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SWOT Analysis
In strategic planning and strategic management, SWOT analysis (also known as the SWOT matrix, TOWS, WOTS, WOTS-UP, and situational analysis) is a decision-making technique that identifies the strengths, weaknesses, opportunities, and threats of an organization or project.

SWOT analysis evaluates the strategic position of organizations and is often used in the preliminary stages of decision-making processes to identify internal and external factors that are favorable and unfavorable to achieving goals. Users of a SWOT analysis ask questions to generate answers for each category and identify competitive advantages.

SWOT has been described as a "tried-and-true" tool of strategic analysis, but has also been criticized for limitations such as the static nature of the analysis, the influence of personal biases in identifying key factors, and the overemphasis on external factors, leading to reactive strategies. Consequently, alternative approaches to SWOT have been developed over the years.

Overview

The name is an acronym for four components:

  • Strengths: characteristics of the business or project that give it an advantage over others
  • Weaknesses: characteristics that place the business or project at a disadvantage relative to others
  • Opportunities: elements in the environment that the business or project could exploit to its advantage
  • Threats: elements in the environment that could cause trouble for the business or project

Results of the assessment are often presented in the form of a matrix.

Internal and external factors

Strengths and weaknesses are usually considered internal, while opportunities and threats are usually considered external. The degree to which an organization's internal strengths matches with its external opportunities is known as its strategic fit.

Internal factors may include:

  • Human resources—staff, volunteers, board members, stakeholders
  • Physical resources—location, building, equipment, plant
  • Financial—revenue, grants, investments, other sources of income
  • Activities and processes—projects, programs, systems
  • Past experiences—reputation, knowledge

External factors may include:

  • Future trends in the organization's field or society at large (e.g. macroeconomics, technological change)
  • The economy—local, national, or international
  • Funding sources—investors, foundations, donors, legislatures
  • Demographics—changes in the age, race, gender, culture of those in the organization serviceable area
  • Physical environment—growth of location in which organisation is situated, access to location
  • Legislation
  • Local, national, or international events

A number of authors advocate assessing external factors before internal factors.

Use

SWOT analysis has been used at different levels of analysis, including businesses, non-profit organizations, governmental units, and individuals. It is often used alongside other frameworks, such as PEST, as a basis for the analysis of internal and environmental factors. SWOT analysis may also be used in pre-crisis planning, preventive crisis management, and viability study recommendation construction.

Strategic planning

SWOT analysis can be used to build organizational or personal strategy. Steps necessary to execute strategy-oriented analysis involve identifying internal and external factors, selecting and evaluating the most important factors, and identifying relationships between internal and external features. For instance, strong relations between strengths and opportunities can suggest good conditions in the company and allow using an aggressive strategy. On the other hand, strong interactions between weaknesses and threats could be analyzed as a warning to use a defensive strategy.

One form of SWOT analysis combines each of the four components with another to examine four distinct strategies:

  • WT strategy (mini–mini): Faced with external threats and internal weaknesses, how to minimize both weaknesses and threats?
  • WO strategy (mini–maxi): Faced with external opportunities and internal weaknesses, how to minimize weaknesses and maximize opportunities?
  • ST strategy (maxi–mini): Faced with internal strengths and external threats, how to maximize strengths and minimize threats?
  • SO strategy (maxi–maxi): Faced with external opportunities and internal strengths, how to maximize both opportunities and strengths?

Matching and converting

A SWOT analysis can be used to generate matching and converting strategies. Matching refers to seeking competitive advantage by matching strengths to opportunities. Conversion refers to converting weaknesses or threats into strengths or opportunities. An example of a conversion strategy is to buy off a threat through collaboration or merger.

Marketing

Main article: Marketing management
See also: Marketing mix

In competitor analysis, marketers can use SWOT analysis to detail and profile the competitive strengths and weaknesses of each competitor in the market. This process may involve analysing competitors' cost structures, sources of profits, resources and competencies, competitive positioning, product differentiation, degree of vertical integration, historical responses to industry developments, among other factors. Relevant marketing research methods may include:

Marketing managers may also design and oversee various environmental scanning and competitive intelligence processes to help identify trends and inform the company's marketing analysis.

SWOT analysis of the market position of a small management consultancy with a specialism in human resource management
Strengths Weaknesses Opportunities Threats
Reputation in marketplace Shortage of consultants at operating level rather than partner level Well established position with a well-defined market niche Large consultancies operating at a minor level
Expertise at partner level in HRM consultancy Unable to deal with multidisciplinary assignments because of size or lack of ability Identified market for consultancy in areas other than HRM Other small consultancies looking to invade the marketplace

In community organizations

An example of a SWOT template that includes cells for strategies, not only assessments
A simple SWOT template

Although the SWOT analysis was originally designed for business and industries, it has been used in non-governmental organisations as a tool for identifying external and internal support to combat internal and external opposition for successful implementation of social services and social change efforts. Understanding particular communities can come from public forums, listening campaigns, and informational interviews and other data collection. SWOT analysis provides direction to the next stages of the change process. It has been used by community organizers and community members to further social justice in the context of social work practice, and can be applied directly to communities served by a specific nonprofit or community organization.

Limitations and alternatives

SWOT analysis is intended as a starting point for discussion and not to, in itself, show managers how to achieve a competitive advantage.

In a highly-cited 1997 critique, "SWOT Analysis: It's Time for a Product Recall", Terry Hill and Roy Westbrook observed that one among many problems of SWOT analysis as often practiced is that "no-one subsequently used the outputs [of SWOT analysis] within the later stages of the strategy". Hill and Westbrook, among others, also criticized hastily designed SWOT lists. Other limitations of SWOT practice include: preoccupation with a single strength, such as cost control, leading to a neglect of weaknesses, such as product quality; and domination by one or two team members doing the SWOT analysis and devaluing possibly important contributions of other team members. Many other limitations have been identified.

Business professors have suggested various ways to remedy the common problems and limitations of SWOT analysis while retaining the SWOT framework.

Porter's five forces

Main article: Porter's five forces analysis
See also: Porter's four corners model

Michael Porter developed the five forces framework as a reaction to SWOT, which he found lacking in rigor and too ad hoc.

SOAR

SOAR (strengths, opportunities, aspirations, and results) is an alternative technique inspired by appreciative inquiry. SOAR has been criticized as having similar limitations as SWOT, such as "the inability to identify the necessary data".

SVOR

In project management, the alternative to SWOT known by the acronym SVOR (Strengths, Vulnerabilities, Opportunities, and Risks) compares the project elements along two axes: internal and external, and positive and negative. It takes into account the mathematical link that exists between these various elements, considering also the role of infrastructures. The SVOR table provides an intricate understanding of the elements hypothesized to be at play in a given project:

Forces Internal Mathematical link External
Positive Total Forces Total Forces given constraints = Infrastructures / Opportunities Opportunities
Mathematical link Vulnerabilities given constraints = 1 / Total Forces constant k Opportunities given constraints = 1 / Risks
Negative Vulnerabilities Risks given constraints = k / Vulnerabilities Risks

Constraints consist of: calendar of tasks and activities, costs, and norms of quality. The "k" constant varies with each project (for example, it may be valued at 1.3).

History

In 1965, three colleagues at the Long Range Planning Service of Stanford Research Institute—Robert F. Stewart, Otis J. Benepe, and Arnold Mitchell—wrote a technical report titled Formal Planning: The Staff Planner's Role at Start-Up. The report described how a person in the role of a company's staff planner would gather information from managers assessing operational issues grouped into four components represented by the acronym SOFT: the "satisfactory" in present operations, "opportunities" in future operations, "faults" in present operations, and "threats" to future operations. Stewart et al. focused on internal operational assessment and divided the four components into present (satisfactory and fault) and future (opportunity and threat), and not, as would later become common in SWOT analysis, into internal (strengths and weaknesses) and external (opportunities and threats).

Also in 1965, four colleagues at the Harvard Graduate School of Business Administration—Edmund P. Learned, C. Roland Christensen, Kenneth R. Andrews, and William D. Guth—published the first of many editions of the textbook Business Policy: Text and Cases. (Business policy was a term then current for what has come to be called strategic management.) The first chapter of the textbook stated, without using the acronym, the four components of SWOT and their division into internal and external appraisal:

Deciding what strategy should be is, at least ideally, a rational undertaking. Its principal subactivities include identifying opportunities and threats in the company's environment and attaching some estimate of risk to the discernible alternatives. Before a choice can be made, the company's strengths and weaknesses must be appraised.

Looking back from three decades later, in the book Strategy Safari (1998), management scholar Henry Mintzberg and colleagues said that Business Policy: Text and Cases "quickly became the most popular classroom book in the field", widely diffusing its authors' ideas, which Mintzberg et al. called the "design school" model (in contrast to nine other schools that they identified) of strategic management, "with its famous notion of SWOT" emphasizing assessment of a company's internal and external situations. However, the textbook contains neither a 2 × 2 SWOT matrix nor any detailed procedure for doing a SWOT assessment. Strategy Safari and other books identified Kenneth R. Andrews as the co-author of Business Policy: Text and Cases who was responsible for writing the theoretical part of the book containing the SWOT components. More generally, Mintzberg et al. attributed some conceptual influences on what they called the "design school" (of which they were strongly critical) to earlier books by Philip Selznick (Leadership in Administration, 1957) and Alfred D. Chandler Jr. (Strategy and Structure, 1962), with other possible influences going back to the McKinsey consulting firm in the 1930s.

By the end of the 1960s, the four components of SWOT (without using the acronym) had appeared in other publications on strategic planning by various authors, and by 1972 the acronym had appeared in the title of a journal article by Norman Stait, a management consultant at the British firm Urwick, Orr and Partners. By 1973, the acronym was well-known enough that accountant William W. Fea, in a published lecture, mentioned "the mnemonic, familiar to students, of S.W.O.T., namely strengths, weaknesses, opportunities, threats". An early example of a 2 × 2 SWOT matrix is found in a 1980 article by management professor Igor Ansoff (but Ansoff used the acronym T/O/S/W instead of SWOT).

  • Television: In the 2015 Silicon Valley episode "Homicide" (Season 2, Episode 6), Jared Dunn (Zach Woods) introduces the Pied Piper team to SWOT analysis. Later in that episode Dinesh (Kumail Nanjiani) and Gilfoyle (Martin Starr) employ the method when deciding whether or not to inform a stunt driver that the calculations for his upcoming jump were performed incorrectly.

See also

References

  1. ^ Nutt, Paul C.; Backoff, Robert W. (Summer 1993). "Transforming public organizations with strategic management and strategic leadership". Journal of Management. 19 (2): 299–347 (316). doi:10.1016/0149-2063(93)90056-S. The SWOTs perspective is often used to pose questions for strategic management (e.g., Ansoff, 1980). Steiner's (1979) 'WOTS' approach, Rowe, Mason and Dickel's (1982) WOTS-UP, and Delbecq's (1989) 'TOWS' framework identify three of many derivations. See also: Weihrich 1982, p. 54: "For convenience, the matrix that will be introduced is called TOWS, or situational analysis"; Sevier 2001, p. 46.
  2. ^ Silva, Carlos Nunes (2005). "SWOT analysis". In Caves, Roger W. (ed.). Encyclopedia of the city. Abingdon; New York: Routledge. pp. 444–445. doi:10.4324/9780203484234. ISBN 978-0415862875. OCLC 55948158.
  3. ^ Examples of the "tried-and-true" trope:
    • Sevier, Robert A. (2001). "Not SWOT, but OTSW". Thinking outside the box: some (fairly) radical thoughts on how colleges and universities should think, act, and communicate in a very busy marketplace. Hiawatha, Iowa: Strategy Pub. p. 46. ISBN 0971059705. OCLC 48165005. Few people realize that there is an inherent danger in conducting a situational analysis using the old tried and true SWOT. The danger is this: When you look inside the organization first, you create a set of glasses through which you will look at the world. In doing so, you are highly likely to overlook significant opportunities and threats. See also Minsky & Aron 2021.
    • Staples, Lee (2004). Roots to power: a manual for grassroots organizing (2nd ed.). Westport, Conn.: Praeger Publishing. p. 136. ISBN 0275969975. OCLC 56085984. The tried and true SWOT Assessment examines positive and negative factors as does a Force Field Analysis, but a SWOT has a particular focus on the upsides and downsides for the action group itself.
    • Lambert, Ron; Parker, Tom (2006). Is that your hand in my pocket?: the sales professional's guide to negotiating. Nashville: Nelson Business. p. 132. ISBN 0785218777. OCLC 63125604. Before you as a salesperson can develop a strategy, you have to assess the situation. We recommend the tried-and-true SWOT analysis. You start by taking a look at your Strengths and Weaknesses, your Opportunities and any Threats. Then you do exactly the same thing from the perspective of each of your competitors.
  4. ^ Ansoff, H. Igor (April 1980). "Strategic issue management". Strategic Management Journal. 1 (2): 131–148. doi:10.1002/smj.4250010204. JSTOR 2486096. S2CID 167511003.
  5. ^ Minsky, Laurence; Aron, David (23 February 2021). "Are you doing the SWOT analysis backwards?". Harvard Business Review. Retrieved 7 November 2021. The results of a SWOT analysis can be (and almost always are) presented simply as a 2 × 2 grid, with one dimension representing the internal versus external factors, and the other depicting positive versus negative valence. ... To improve the inventory collection, you should start with the external factors, then turn your attention to the firm's internal ones. See also Sevier 2001.
  6. ^ Learned, Edmund Philip; Christensen, C. Roland; Andrews, Kenneth R.; Guth, William D. (1965). Business policy: text and cases (1st ed.). Homewood, Illinois: Richard D. Irwin, Inc. p. 20. OCLC 680327. (See also Andrews 1971, p. 37.) Many publications cite this textbook as an early statement of the ideas behind SWOT, although it contains neither a 2 × 2 matrix nor any detailed procedure for doing a SWOT assessment; for example, Robert S. Kaplan and David P. Norton called this textbook "one of the early SWOT references", in: Kaplan, Robert S.; Norton, David P. (2008). The execution premium: linking strategy to operations for competitive advantage. Boston, MA: Harvard Business Press. p. 67. ISBN 9781422121160. OCLC 227277585.
  7. ^ Andrews, Kenneth R. (1971). The concept of corporate strategy. Homewood, Ill.: Dow Jones–Irwin. p. 37. ISBN 0870940120. OCLC 151781.
  8. ^ Mintzberg, Henry; Ahlstrand, Bruce W.; Lampel, Joseph (1998). "The design school: strategy formation as a process of conception". Strategy safari: a guided tour through the wilds of strategic management. New York: Free Press. pp. 24–25. ISBN 0684847434. OCLC 38354698.
  9. ^ "Community Toolbox: Section 14. SWOT analysis". Community Tool Box. Center for Community Health and Development at the University of Kansas. Retrieved 2014-02-22.
  10. ^ Weihrich, Heinz (April 1982). "The TOWS matrix—a tool for situational analysis". Long Range Planning. 15 (2): 54–66. doi:10.1016/0024-6301(82)90120-0. S2CID 154914972.
  11. ^ Watkins, Michael D. (27 March 2007). "From SWOT to TOWS: answering a reader's strategy question". Harvard Business Review. Retrieved 7 November 2021.
  12. ^ Some examples of publications that suggest remedies for common problems and limitations of SWOT analysis:
    • Valentin, Erhard K. (April 2001). "SWOT analysis from a resource-based view". Journal of Marketing Theory and Practice. 9 (2): 54–69. doi:10.1080/10696679.2001.11501891. JSTOR 40470032. S2CID 167660094.
    • Coman, Alex; Ronen, Boaz (October 2009). "Focused SWOT: diagnosing critical strengths and weaknesses". International Journal of Production Research. 47 (20): 5677–5689. doi:10.1080/00207540802146130. S2CID 109603771.
    • Helms, Marilyn M.; Nixon, Judy (August 2010). "Exploring SWOT analysis—where are we now? A review of academic research from the last decade". Journal of Strategy and Management. 3 (3): 215–251. doi:10.1108/17554251011064837.
    • Agarwal, Ravi; Grassl, Wolfgang; Pahl, Joy (January 2012). "Meta-SWOT: introducing a new strategic planning tool". Journal of Business Strategy. 33 (2): 12–21. doi:10.1108/02756661211206708.
    • Bell, Geoffrey G.; Rochford, Linda (November 2016). "Rediscovering SWOT's integrative nature: a new understanding of an old framework". The International Journal of Management Education. 14 (3): 310–326. doi:10.1016/j.ijme.2016.06.003.
    • Lohrke, Franz T.; Mazzei, Matthew J.; Frownfelter-Lohrke, Cynthia (June 2021). "Should it stay or should it go? Developing an enhanced SWOT framework for teaching strategy formulation". Journal of Management Education. 46 (2): 345–382. doi:10.1177/10525629211021143. S2CID 236311321.
  13. ^ Armstrong, Michael (2001). A handbook of human resource management practice (8th ed.). London: Kogan Page. p. 51. ISBN 9780749433932. OCLC 59549399.
  14. ^ Pickton, David W.; Wright, Sheila (March 1998). "What's swot in strategic analysis?". Strategic Change. 7 (2): 101–109. doi:10.1002/(SICI)1099-1697(199803/04)7:2<101::AID-JSC332>3.0.CO;2-6.
  15. ^ Osita, Christian; Onyebuchi, Idoko; Justina, Nzekwe (31 January 2014). "Organization's stability and productivity: the role of SWOT analysis" (PDF). International Journal of Innovative and Applied Research. 2 (9): 23–32. Retrieved 17 March 2016.
  16. ^ Piercy, Nigel; Giles, William (May 1989). "Making SWOT analysis work". Marketing Intelligence & Planning. 7 (5/6): 5–7. doi:10.1108/EUM0000000001042.
  17. ^ Armstrong, Michael (1990). Management processes and functions. Management studies series. London: Institute of Personnel Management. ISBN 0-85292-438-0. OCLC 21301791.
  18. ^ Birkenmaier, Julie; Berg-Weger, Marla (2017). "Organizational engagement, assessment, and planning". The practice of generalist social work (4th ed.). New York: Routledge. pp. 552–577. ISBN 9781138057852. OCLC 971892636.
  19. ^ Westhues, Anne; Lafrance, Jean; Schmidt, Glen (February 2001). "A SWOT analysis of social work education in Canada". Social Work Education: The International Journal. 20 (1): 35–56. doi:10.1080/02615470020028364. S2CID 143892190.
  20. ^ Dess, Gregory G.; Lumpkin, G. Thomas; Eisner, Alan B.; McNamara, Gerry (2012). "The limitations of SWOT analysis". Strategic management: text and cases (6th ed.). New York: McGraw-Hill/Irwin. pp. 82. ISBN 9780078029318. OCLC 740281685.
  21. ^ Hill, Terry; Westbrook, Roy (February 1997). "SWOT analysis: it's time for a product recall". Long Range Planning. 30 (1): 46–52. CiteSeerX 10.1.1.469.2246. doi:10.1016/S0024-6301(96)00095-7.
  22. ^ Koch, Adam (2000). "SWOT does not need to be recalled: It needs to be enhanced". B>Quest. Richards College of Business, State University of West Georgia. ISSN 1084-3981.
  23. ^ Chermack, Thomas J.; Kasshanna, Bernadette K. (December 2007). "The use of and misuse of SWOT analysis and implications for HRD professionals". Human Resource Development International. 10 (4): 383–399. doi:10.1080/13678860701718760. S2CID 145098663.
  24. ^ Porter, Michael; Argyres, Nicholas; McGahan, Anita M. (2002). "An interview with Michael Porter". The Academy of Management Executive (1993–2005). 16 (2): 43–52. JSTOR 4165839.
  25. ^ Stavros, Jacqueline M.; Cooperrider, David; Kelley, D. Lynn (2007). "SOAR: a new approach to strategic planning". In Holman, Peggy; Devane, Tom; Cady, Steven (eds.). The change handbook: the definitive resource on today's best methods for engaging whole systems (2nd ed.). San Francisco: Berrett-Koehler. pp. 375–380. ISBN 9781576753798. OCLC 66527256.
  26. ^ Stavros, Jacqueline M.; Hinrichs, Gina (2009). The thin book of SOAR: building strengths-based strategy. Bend, OR: Thin Book Pub. Co. ISBN 9780982206805. OCLC 662578328.
  27. ^ McLean, Gary N. (Winter 2017). "Will SOAR really help organization development soar?: an invited reaction to Zarestky and Cole, 2017". New Horizons in Adult Education and Human Resource Development. 29 (1): 25–28. doi:10.1002/nha3.20168.
  28. ^ Mesly, Olivier (2017). Project feasibility: tools for uncovering points of vulnerability. Industrial innovation series. Boca Raton, FL: CRC Press. doi:10.1201/9781315295251. ISBN 9781498757911. OCLC 953982371.
  29. ^ Puyt, Richard W.; Lie, Finn Birger; De Graaf, Frank Jan; Wilderom, Celeste P. M. (July 2020). "Origins of SWOT analysis". Academy of Management Proceedings. 2020 (1): 17416. doi:10.5465/AMBPP.2020.132. S2CID 225400774.
  30. ^ Browne, Michael; Banerjee, Bobby; Fulop, Liz; Linstead, Stephen (1999). "Managing strategically". In Fulop, Liz; Linstead, Stephen (eds.). Management: a critical text. South Yarra, Vic.: Macmillan Education. pp. 364–413 (373–379). doi:10.1007/978-1-349-15064-9_11. ISBN 0732937191. OCLC 39837267.
  31. ^ An analysis of the "design school" model was also in Mintzberg's earlier publications such as: Mintzberg, Henry (March 1990). "The design school: reconsidering the basic premises of strategic management". Strategic Management Journal. 11 (3): 171–195. doi:10.1002/smj.4250110302. JSTOR 2486485.
  32. ^ Kiechel, Walter (2010). The lords of strategy: the secret intellectual history of the new corporate world. Boston, MA: Harvard Business Press. p. 121. ISBN 9781591397823. OCLC 259247279. What Andrews and his colleagues in the Business Policy course resolutely refused to do—and the main reason his ideas largely disappear from the subsequent history of strategy—was to agree that there were standard frameworks or constructs that could be applied to analyzing a business and its competitive situation. Oh, they might allow one, perhaps because they had helped develop it: so-called SWOT analysis, which called for looking at the strengths, weaknesses, opportunities, and threats besetting an enterprise.
  33. ^ Hill & Westbrook 1997, p. 47: "The work of Kenneth Andrews has been especially influential in popularizing the idea that good strategy means ensuring a fit between the external situation a firm faces (threats and opportunities) and its own internal qualities or characteristics (strengths and weaknesses)."
  34. ^ McKinsey, James Oscar (1932). Adjusting policies to meet changing conditions. General management series. Vol. G.M. 116. New York: American Management Association. OCLC 10865820. Presented at the AMA General Management Conference held in New York, May 3, 1932.
  35. ^ Examples of publications in the late 1960s that mention the four components of SWOT without using the acronym include:
    • Quinn, James Brian (Autumn 1968). "Technological strategies for industrial companies". Management Decision. 2 (3): 182–188. doi:10.1108/eb000858.
    • Hargreaves, D. (March 1969). "Corporate planning: a chairman's guide". Long Range Planning. 1 (3): 28–37. doi:10.1016/0024-6301(69)90069-7.
    • Humble, John W. (June 1969). "Corporate planning and management by objectives". Long Range Planning. 1 (4): 36–43. doi:10.1016/0024-6301(69)90044-2.
    • Ringbakk, Kjell-Arne (December 1969). "Organised planning in major U.S. companies". Long Range Planning. 2 (2): 46–57. doi:10.1016/0024-6301(69)90009-0.
    • Steiner, George A. (1969). Top management planning. Studies of the modern corporation. New York: Macmillan. OCLC 220043.
  36. ^ Stait, Norman H. (July 1972). "Management training and the smaller company: SWOT analysis". Industrial and Commercial Training. 4 (7): 325–330. doi:10.1108/eb003232.
  37. ^ Fea, William W. (1973). "The sixtieth Thomas Hawksley lecture: The accountant—overhead burden or service?". Proceedings of the Institution of Mechanical Engineers. 187 (1): 687–697 (689). doi:10.1243/PIME_PROC_1973_187_155_02.
  38. ^ "Synopsis: Silicon Valley – 'Homicide'". HBO.

Further reading

SWOT analysis is described in very many publications. A few examples of books that describe SWOT analysis and are widely held by WorldCat member libraries and available in the Internet Archive are:

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